711.94/21629/14
Memorandum of a Conversation
Mr. Hamilton and Mr. Ballantine met Colonel Iwakuro and Mr. Wikawa in pursuance of an arrangement agreed upon the previous evening. Mr. Matsudaira was also present. The conversation of the previous evening was continued at the point at which it had been left off.
With regard to exchange and currency control, Colonel Iwakuro said he felt that upon the conclusion of a peace settlement this matter would rest with the Chinese Government as provided in paragraph four of the “Agreed Terms of Understanding” in connection with the [Page 477] stipulations of the protocol annexed to the treaty concluded by the Japanese Government with the Wang Ching-wei regime. He said, in reply to questions, that the Japanese Government would, of course, in connection with the withdrawal of its troops, enter into arrangements with China providing for the redemption by Japan of the military script issued by the Japanese in central China and also of the Federal Reserve currency issued in north China. When asked how he interpreted the provision in paragraph four of the “Agreed Terms of Understanding” to the effect that control by China of its foreign trade must not affect the principle of Sino-Japanese economic cooperation, Colonel Iwakuro pointed out that the Japanese must be allowed to operate the mines and other economic enterprises which they had acquired in north China and which they had paid for, as Japan depended upon these enterprises for the supply of vital raw materials which Japan lacked and which Japan needed. He said that the economic provisions of the peace terms which they desired to seek from the Chungking Government were along the lines of those in the treaty with the Wang Ching-wei regime. He expressed his conviction that those terms were unprecedentedly generous, that Japan was getting no indemnities and no territory, but he felt that Japan should at least be secure in these mining and other properties and that as Japan had paid for them they should not be in danger of confiscation by the Chinese Government. He hoped that we would consider these properties as lying outside the scope of the principle of non-discrimination. He said, otherwise, so far as trade was concerned, there would be no discrimination or preferences in favor of Japan. Colonel Iwakuro said that the Japanese would be very glad to consider any suggestion that we might have to offer with regard to a formula for dealing with these economic questions. We said that we would consider what the Japanese had said and we might have further questions to ask them at a later meeting.
The conversation then turned to the question of retention of Japanese troops in connection with cooperation with China in resistance against communistic activities. We went over again the same ground that we had previously covered again and again on this subject. Colonel Iwakuro finally said that they could not fix a time limit within which they would undertake to withdraw troops retained in Inner Mongolia and North China for this purpose, that they desired to present this matter to the Chinese Government as a part of the general settlement and not at some future date just prior to completion of withdrawal of their troops, and that the retention of troops in China for resistance against communistic activities was an absolute point on which the Japanese Government would have to insist. He hoped that we could devise some formula in which possible criticisms from the American public might be met.
[Page 478]With regard to the formula covering the relations of Japan and the United States with the European war, Mr. Wikawa offered a tentative thought which he wished us to consider, reading as follows:
“It is hereby expressedly reserved that the stipulation of this Understanding shall not affect, in any manner whatever, the right of self-defense which each country may exercise vis-à-vis any third power.”
He suggested that we might wish to consider whether this thought should be contained in an annex or in an exchange of letters or take some other form.
We said that we would go over carefully the points which had been discussed and would get in touch with the Japanese on the following day with a view to arranging a further discussion.